The models discussed - Gravity, Ricardian, Specific factor and Heckscher-Ohlin models - all focus on some aspect of trade. These factors are summarized in the Standard Model of Trade.

a. Please explain the conditions that create gains from trade, using any one of these models of your choice. You can either do that using words, or graphs or math.

b. How is the world equilibrium, i.e. the price, determined in the Standard Model of trade. Use the concepts of relative supply and demand, PPF and other concepts discussed in class. You can either do that using words, or graphs or math.